Apple bets on AI for iPhone boost amidst faltering China sales

• Apple anticipates more profits via AI to draw customers, even in light of its disappointing sales in China.
• The company plans major iPhone software upgrades this autumn, while analysts predict a strong upgrade cycle for the iPhone 16 series.

OUR TAKE
Apple’s strategic focus on AI-driven features for upcoming iPhone models aims to boost sales despite underperformance in China, highlighting the company’s adaptability in a competitive market. However, the success of this approach will depend on how effectively Apple can integrate AI to enhance user experience and differentiate from rivals like Samsung.
-Vivienne Xie, BTW reporter See also: Carla Sanderson.

What happened

Apple reported stronger-than-expected third-quarter iPhone sales on Thursday, forecasting further gains as it leverages artificial intelligence to attract buyers, despite disappointing overall performance in China. Shares rose nearly 1% in extended trading, outperforming other tech stocks.

Apple is set to launch a significant software upgrade for the iPhone this autumn, incorporating AI features. This comes as competitors like Samsung have been quicker to introduce similar services. Apple anticipates fourth-quarter revenue growth to match the 4.9% increase seen from April to June, surpassing analysts’ estimates. iPhone sales in the third quarter improved, with a 0.9% decline compared to the 2.2% drop analysts expected.

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Why it’s important

Chief Financial Officer Luca Maestri highlighted the iPhone 15’s strong performance, noting it outpaced the iPhone 14. However, sales in China, Apple’s third-largest market, fell 6.5%, an improvement from the previous quarter but still wider than expected. Excluding foreign exchange effects, China sales dropped less than 3%, with Apple feeling optimistic about its performance despite economic softness. See also: Kaleem Ahmed Usmani.

To compete with local competitors like Huawei, Apple has discounted iPhones in China, offering reductions of up to 2,300 yuan ($317) on selected models in May. Analysts predict a strong upgrade cycle for the iPhone 16 series, expected in September, driven by new AI products and services introduced at Apple’s June developer conference. These AI features require at least an iPhone 15 Pro, potentially pushing consumers to upgrade.

Despite Apple’s AI features arriving later than rivals, CEO Tim Cook stated it is “too early to tell” if AI is driving upgrades. Apple faces regulatory challenges, including three European Union probes related to the Digital Markets Act and a US Department of Justice accusation of monopolising the smartphone market. Apple’s quarterly earnings per share were $1.40, above Wall Street estimates. Services segment sales rose 14.1% to $24.21 billion, and iPad sales surged 23.7% to $7.16 billion, boosted by new AI-focused products. Mac sales and wearables segment results were mixed, with the latter seeing a 2.3% decline. Apple maintained its dividend at 25 cents and announced a $110 billion stock buyback in the fiscal second quarter. See also: ArdaDaglioglu AS210880 routing identity.